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Jul 23, 2020

Market Insider | Biggest Moves Premarket: Stocks making the biggest moves in the premarket: Twitter, AT&T, Blackstone, Tesla, Microsoft & more

Peter Schacknow

Take a look at some of the biggest movers in the premarket:

Twitter (TWTR) – Twitter reported a 34% jump in the key metric monetizable daily active users compared to a year ago, bringing the total to 186 million. Revenue fell short of Street forecasts, and Twitter reported an overall loss for the second quarter due to a one-time item related to a non-cash asset.
AT&T (T) – AT&T beat estimates by 4 cents a share, with quarterly earnings of 83 cents per share. Revenue was in line with forecasts. The company said the Covid-19 pandemic impacted results across all its businesses.
Blackstone (BX) – The private-equity firm’s distributable earnings per share of 43 cents matched Wall Street forecasts, with the value of its private-equity portfolio jumping 12.8% during the quarter.
PulteGroup (PHM) – The home builder beat estimates by 28 cents a share, with quarterly earnings of $1.15 per share. Revenue topped estimates as well, helped by low mortgage rates and a shortage of existing home inventories.
Southwest Airlines (LUV) – The airline lost $2.67 per share for the second quarter, a penny a share wider than expected. Revenue was above forecasts. Southwest said it expected travel demand to remain depressed until a Covid-19 vaccine is developed.
American Airlines (AAL) – American posted a quarterly loss of $7.82 per share, compared to a consensus estimate of a $7.70 per share loss. Revenue beat forecasts. American will sell $1.2 billion in senior notes, increasing its available liquidity to $16.2 billion.
Dow Inc. (DOW) – The chemical maker said it would implement a restructuring that would see it cut 6% of its global workforce and exit unprofitable segments, saving it $300 million annually.
AutoNation (AN) – The auto dealer earned an adjusted $1.41 per share, well above the consensus estimate of 37 cents, with revenue also above forecasts.
Microsoft (MSFT) – Microsoft reported quarterly earnings of $1.46 per share, 12 cents a share above estimates. Revenue also came in above forecasts. The company said the increase in the number of home-based workers boosted its cloud computing business, but the pandemic has also slowed sales to small businesses as well as ad revenue for its LinkedIn unit.
Tesla (TSLA) – Tesla earned $2.18 per share for the second quarter, compared to a consensus estimate of 3 cents per share. Revenue was above estimates as well, helped by the sale of $428 million in emissions credits while it dealt with the negative impact of the pandemic on automobile production and sales.
Las Vegas Sands (LVS) – Las Vegas Sands lost $1.05 per share for its second quarter, wider than the 74 cents a share loss that analysts were expecting. The casino operator’s revenue also missed estimates. Las Vegas Sands saw a 97% drop in revenue from a year earlier as the pandemic kept visitors away from its gambling operations in Las Vegas and Macau.
Whirlpool (WHR) – Whirlpool earned $2.15 per share for the second quarter, more than doubling the $1 a share consensus estimate. Revenue also beat forecasts, with the appliance maker noting recovery across all its regions as the quarter came to a close in June. Whirlpool also raised its full-year revenue outlook.
Chipotle Mexican Grill (CMG) – Chipotle beat estimates by 5 cents a share, with quarterly earnings of 40 cents per share. The restaurant chain’s revenue was slightly above analyst forecasts. Same-restaurant sales fell 9.8%, smaller than the 11.9% decline that analysts had predicted.
Unilever (UN, UL) – Unilever saw sales drop less than expected during the second quarter, thanks to a strong performance in the consumer product company’s North American market. Sales fell just 0.3%, less than the 4.3% decline that analysts had predicted, although it was the first decline in quarterly sales for Unilever since 2004.
Corteva (CTVA) – The agricultural sciences company will be allowed to continue selling its weed killer Enlist Duo, following a ruling from a U.S. appeals court. That follows an earlier decision by the same court to block sales of a rival herbicide sold by Bayer. Environmental groups had sought a ban for the Corteva product.
New York Times (NYT) – The Times is buying podcast producer Serial Productions, to expand its podcasting operations. Terms weren’t disclosed but The Wall Street Journal reports the deal could be worth as much as $50 million.
Bank of America (BAC) – Warren Buffett’s Berkshire Hathaway (BRK.B) raised its stake in Bank of America to 11.3% from 10.9%, according to a Securities and Exchange Commission filing. The new shares were purchased this week for an average price of $23.99 per share.
Align Technology (ALGN) – Align lost 35 cents per share, wider than the 5 cents a share loss that analysts had predicted The maker of the Invisalign teeth straightening device’s revenue came in above Wall Street forecasts. Results were impacted by dental practice closures related to the pandemic, but Align said practices had now reopened in all regions and that practitioners are increasingly using virtual tools as well.

Analysis | The Cybersecurity 202: Nearly one-fourth of Americans live in states making it harder to vote by mail

Joseph Marks

with Tonya Riley

Nearly one in four U.S. voters live in states that will make it difficult or impossible for them to vote by mail in November, despite the health dangers posed by in-person voting during the coronavirus pandemic.
A total of nine states comprising 54 million voters are maintaining tight restrictions on mail voting even as other states run by Republicans and Democrats alike have rushed to expand the practice. 
Those states will allow a handful of people to vote by mail if they’re ill, elderly or serving in the military out of state. But they won’t accept fear of the coronavirus as an adequate excuse to vote by mail, as Kate Rabinowitz and Brittany Renee Mayes report. They’ve held fast even as coronavirus infections have surged to more than 3 million Americans and deaths again begin to climb.
The broad lack of access to mail ballots is a prime example of how some states may make it exceptionally difficult for a slew of Americans to vote safely and securely during the pandemic. The gap is a rallying cry for Democrats who fear state rules — along with President Trump’s relentless attacks on mail voting — could force people to risk their health by voting in person or forego voting altogether.
It’s a stark example of how Americans’ ability to vote safely and securely during the pandemic can vary widely from state to state. It has also become a rallying cry for Democrats who fear those stringent rules — along with President Trump’s relentless attacks on mail voting — could force people to risk their health by voting in person or forego voting altogether.
They’re making a last-ditch effort to include up to $3.6 billion in election funding in the next coronavirus stimulus bill along with mandates that states ensure all their residents have the opportunity to vote by mail in November.
I would rather be putting ballots in a mailbox than people in the hospital,” Sen. Amy Klobuchar (D-Minn.), said during a Senate Rules Committee hearing on the topic. “That’s a choice we have for so many voters and that’s why you see overwhelming support for getting funding, and something I believe we can get done on a bipartisan basis.”

Most of the states still restricting mail voting lean Republican – but not all of them. 

Seven of the nine states traditionally vote Republican in presidential elections, but the list also includes left-leaning New York and Connecticut. Texas, a perennial red state that Democrats hope might flip blue this election, is also on the list.
The list also includes several states that allowed broad mail voting during primaries they held during the pandemic, including New York, Kentucky and West Virginia. The other states are Indiana, South Carolina, Louisiana and Mississippi.
There’s no uniform reasoning behind the states’ hesitancy to expand mail voting, though reasons likely include budget shortfalls, officials who are unfamiliar and uncomfortable with the process, and concerns about verifying the identity of people who vote by mail.

It’s probably also driven in some states by Trump's repeated broadsides against mail voting.

The president has claimed without evidence that the practice will lead to widespread fraud. He even has speculated he may not accept the election results because they’ll be “rigged” by mail voting, causing concern among Democrats and legal experts, as Elise Viebeck and Robert Costa report.
Trump has repeated those claims even as many Republican election officials have embraced mail voting as the most secure option during coronavirus. The baseless claims seem to have had an effect in primaries where Republicans have voted by mail at lower levels than Democrats in many states.
The consequences are potentially severe. In states where deadlines made voting by mail difficult during the primaries, there were frequently long lines at a reduced number of polling places. In Wisconsin, which held its primary during the early days of the virus with little preparation, lines stretched for blocks in Milwaukee and Green Bay. More than 70 people who went to polls that day later tested positive for the coronavirus.

Democrats’ argument is simple: Forcing people to vote in person during the pandemic is dangerous and tantamount to voter suppression. 

That danger outweighs Republicans’ concerns it’s inappropriate for the federal government to tell states how to run elections, they say.
“While we are happy with a lot of the work that's been going on in the states...there are still a lot of problems out there,” Klobuchar said. She’s a sponsor of the main Democratic measure to increase federal election funding, which would also mandate that states allow all voters to cast mail ballots and offer 15 days of early voting.
Klobuchar and other Democrats went toe-to-toe during a hearing yesterday with Tennessee Secretary of State Tre Hargett (R), whose state has traditionally opposed mail voting. Tennessee is currently required to let all its registered voters cast ballots by mail in November because of a state court ruling by a judge in Nashville. But state leaders are appealing that ruling at the state Supreme Court and may succeed in reversing it before November.
You’re saying someone can’t say I don’t want to stand in line for two hours with several hundred other people and [risk] my health? That’s not good enough in your state?...That’s pitiful,” Sen. Angus King (I-Maine) said.
Hargett said Tennessee’s legislature had considered expanding mail voting during the pandemic and decided firmly against it. “The policymakers of our great state of Tennessee have made that decision,” he said.
Sen. Patrick Leahy (D-Vt.) went a step further, accusing officials who aren’t allowing expanded mail voting of actively trying to suppress turnout.
“Doing everything you can to make people who may be vulnerable to covid appear in person doesn’t make it sound like you want people to show up and vote,” he said.

The keys

Hackers who compromised high-profile Twitter accounts spied on 36 users' private messages. 

That's in addition to taking over the accounts of 130 users to support a bitcoin scheme, including the accounts of Joe Biden, Barack Obama and Elon Musk, and stealing the direct messages of eight users. The users whose DMs were compromised included one elected official in the Netherlands, the company said in an update yesterday.
While hackers have compromised individual accounts in the past, including chief executive Jack Dorsey's, the recent hack represents one of the company's largest security breaches.  
The company pinned the attack on hackers who conned employees into giving up credentials that provided access to Twitter's internal systems. The FBI is investigating the attack, which it believes was financially motivated.

Biden's campaign is accusing Senate Republicans of amplifying foreign disinformation.

The accusations target a probe led by Senate Homeland Security Chairman Ron Johnson (R-Wis.) and Judiciary Chairman Charles E. Grassley (R-Iowa). The probe focuses on Biden’s son Hunter’s former role on the board of the Ukrainian energy company Burisma and whether it unduly influenced Obama administration policy. There is no evidence that is the case.
That investigation was also reportedly behind a claim by Democratic congressional leaders that Congress is being used as a tool to “launder and amplify” foreign disinformation about the election.
“Sen. Johnson should be working overtime to save American lives and jobs — but instead he's wasting taxpayer dollars on a blatantly dishonest attempt to help Donald Trump get reelected,” Biden deputy campaign manager Kate Bedingfield wrote in a memo obtained by NBC News.
The Biden campaign also slammed Johnson and the White House for refusing to address reports that pro-Russian foreigners have fed them materials for the Biden probe.

France may fully restrict Huawei from its 5G network by 2028.  

French authorities have told telecom operators that don’t have Huawei gear to steer clear of it and told those with such gear they’ll renew licenses for it only for three to eight years, Mathieu Rosemain and Gwénaëlle Barzic at Reuters report. That will result in the Chinese telecom being effectively banned from France when those licenses expire.
The de facto ban is another blow against Huawei in Europe. The United Kingdom banned Huawei from its 5G network build-out earlier this month. The United States has aggressively lobbied European allies to ban Huawei, which it says could be exploited for spying by Beijing. Huawei denies the allegations.
Chinese officials have threatened to retaliate against European telecom equipment companies if other countries in the region follow suit.

Chat room

ProPublica's Jessica Huseman went deep on problems plaguing the agency tasked with helping states maintain the integrity of U.S. elections.
Legal scholar Rick Hasen provided some more historical context:


The personal information of hundreds of thousands of Instacart customers is for sale on the dark web.

The data includes names, credit card information, addresses and transaction information from as recently as Tuesday, Jane Lytvynenko at BuzzFeed News reports. Two different sellers appeared to be offering information from 278,531 accounts, though it's unclear if some are repeat or fake accounts.
Instacart operates a grocery delivery service that has surged in popularity during the pandemic. The company denied it was breached.
But cybersecurity expert Nick Espinosa told BuzzFeed the data looked legitimate. Two customers whose data was for sale confirmed to BuzzFeed that the dark web information matched their recent purchases and credit card information.
More hacking news:

Industry report

Apple is enlisting cybersecurity researchers to help find bugs in its phones. 

The company will give the researchers modified iPhones that make it easier for them to probe the phones for flaws, Joseph Menn at Reuters reports. Apple first promised the initiative last year after years of complaints from security researchers that the company made it difficult for them to find and report security issues.
Apple sued cybersecurity start-up Corellium last year for copyright infringement for offering a virtual interface of the iPhone to help researchers look for bugs, further chilling its relationship with the research community. Researchers speculate that iPhones may appear to be more secure than Android devices only because it's tougher for researchers to examine them for flaws.
Apple executives haven’t said how many researchers will receive the initial batch of phones. The company will also make senior engineers available to researchers who find issues, another step toward greater transparency.


  • The Senate Commerce Committee will hold a hearing on The PACT Act and Section 230 on Tuesday at 10 a.m.

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US Market | Futures Indicator: Stock futures rise ahead of weekly U.S. jobless claims

Fred Imbert, Thomas Franck, Sam Meredith

Futures contracts tied to the major U.S. stock indexes were slightly higher Thursday morning as investors awaited key economic data and parsed through a slew of corporate earnings.
At around 7 a.m. ET, Dow Jones Industrial Average futures rose 99 points, implying an opening gain of 90 points when regular trading resumes on Thursday. S&P 500 and Nasdaq-100 futures were both slightly higher.
The Labor Department is scheduled to release its latest report on weekly jobless claims at 8:30 a.m. The weekly figures provide Wall Street with critical insight on how many Americans continue to collect unemployment benefits, known as continuing claims.
Another 1.3 million workers are expected to have filed first-time claims for state unemployment benefits during the week ended July 18.
Wall Street’s attention in premarket trading was also on earnings announcements from several U.S. companies, but especially Microsoft and carmaker Tesla.
Despite better-than-expected figures, software giant Microsoft shares fell as much as 3% in after-hours trading. Though the company’s results were largely positive, Microsoft said its transactional license purchasing continued to slow and that subsidiary LinkedIn was negatively impacted by the weak job market.
Tesla, meanwhile, blew past analyst expectations and posted its fourth consecutive quarter of profit, opening the door for the company’s inclusion in the S&P 500.  Excluding one-time charges, Tesla’s second-quarter earnings per share of $2.18 were well above the 3 cents per share expected by analysts polled by Refinitiv.
Elon Musk’s automaker also said it’s set “for a successful second half” and reiterated its goal of delivering 500,000 vehicles this year. 
The moves followed a positive regular session on Wednesday, with the major indexes all posting modest gains on both vaccine and federal stimulus announcements.
The Dow Jones Industrial Average finished the day up 165.44 points, or 0.6%, with McDonald’s and Microsoft contributing the most to the index. The S&P 500 also rose about 0.6% as utilities and real estate investment trusts led the broader market higher. The Nasdaq Composite, meanwhile, rose 0.2%.
The three indexes are up 1.25%, 1.59% and 1.9%, respectively, for the week.
Equities caught a morning bid after the U.S. agreed to pay drugmaker Pfizer and German partner BioNTech nearly $2 billion for 100 million coronavirus vaccines if their candidate proves both safe and effective.
U.S. stocks also rallied toward the end of the regular session on Wednesday after sources told CNBC that congressional Republicans are weighing an extension of watered-down federal unemployment benefits through the end of the year.

News | Business | Europe | Investments: Venture capitalists are piling millions into trendy European e-bike start-ups

Sam Shead

CEO of Cowboy Adrien Roose (left) and Index Ventures partner Martin Mignot (right)
CEO of Cowboy Adrien Roose (left) and Index Ventures partner Martin Mignot (right)

Index Ventures
Venture capital firms are pumping money into e-bike start-ups as the coronavirus pandemic forces city dwellers to find new ways of getting from A to B.
Technology investors have recently placed bets on young e-bike companies in the cycle-friendly cities of Berlin, Tallinn, Amsterdam, and Brussels. There’s a potentially huge market: accountancy firm Deloitte estimates that over 130 million e-bikes will be sold between 2020 and 2023.
Brussels-based Cowboy became the latest e-bike start-up to raise VC funding on Thursday, with the company announcing a 23 million euro ($27 million) series B funding round led by Exor Seeds, the early stage investment arm of Exor, which is the controlling shareholder of Ferrari.
The company’s e-bikes, which cost 2,290 euros, are linked to an app that is used to unlock the bike and give real-time information on speed, battery life and directions.
Index Ventures, which has backed the likes of Facebook, Robinhood, and Citymapper, also participated in the round. Martin Mignot, partner at Index, told CNBC that e-bikes are now more popular than regular bikes in some countries.
“As cities and city centers transition away from cars, I expect more people will fall in love with e-bikes and realize how perfect they are for getting around town without breaking a sweat,” he said.
“Long are the days when e-bikes were clunky and mostly designed for the elderly. Electric bikes of today are cool and the experience riding them is magical. When I first tried an e-bike from Cowboy, it was like holding the iPhone for the first time, and just as the iPhone it marries software and hardware beautifully.”
Cowboy’s latest funding round comes just two days after the launch of e-bike subscription service Dance.
The Berlin-headquartered company, set up by the founder’s of music streaming service SoundCloud, said that it has raised 4.4 million euros ($5.1 million) from a consortium of investors led by VC firm BlueYard, which is also based in Berlin.
Unlike other start-ups, Dance doesn’t want to sell e-bikes, which can cost well in excess of $2,000.
Instead, it has launched a 59 euro per month subscription service that gives customers access to an e-bike within 24 hours of them signing up via the company’s app. Dance says it will also take care of the e-bike and replace it for free immediately if it gets lost or stolen.
Dance cofounders (L-R): Christian Springub, Eric Quidenus-Wahlforss, and Alexander Ljung.
Ciarán O’Leary, general partner at BlueYard, told CNBC that he backed Dance because there is an urgent need and an “outsized opportunity” to re-shape urban landscapes away from cars and toward people.
He added that the founders “have a keen sense for product, software and community.”
The company is only just getting started though and it’s likely to be several months before it starts expanding outside Berlin.

Picking winners

In May, London-based VC firm Balderton Capital led a 12.5 million euro round into Amsterdam e-bike retailer VanMoof, which had a two-month waiting list at the time.
“Everything changed due to the virus and everything started growing even faster,” said Taco Carlier on a call with CNBC in May, adding that global sales were up around 48% compared to the same period last year, and U.K. sales are up 184%.
VanMoof’s bikes — sold in VanMoof stores in Amsterdam, Paris, Berlin, London, New York, Seattle, San Francisco, Taipei and Tokyo — are equipped with anti-theft technology. A bike’s location can be tracked on the company’s smartphone app and if a bike does go missing, the company’s “bike hunters” will go and retrieve it for them.
The company, which employs around 250 people, has sold over 120,000 of its e-bikes, which are made in either The Netherlands or Taiwan. The two latest models (the S3 and the X3) cost 1,998 euros ($2,170).
“Even before these challenging times, electric bikes were on a rapid growth trajectory,” wrote Balderton investor Colin Hanna in a blog post at the time of the investment.
“As people and companies around the world begin to think about safe commuting options going forward, we believe that the quality and experience of riding VanMoof’s bikes, their strong community-driven brand and their innovative go to market will help VanMoof become a household name from Tokyo to Berlin.”
In September 2019, crowdfunding investors backed Tallinn-headquartered Ampler Bikes with 2.47 million euros.
The money came from 1,241 investors from 29 different countries.

News | Business | US-China Market Risk: Market risks are rising as US, China tensions escalate toward new cold war

Patti Domm

Chinese President Xi Jinping (R) and US President Donald Trump attend their bilateral meeting on the sidelines of the G20 Summit in Osaka on June 29, 2019.
Chinese President Xi Jinping (R) and US President Donald Trump attend their bilateral meeting on the sidelines of the G20 Summit in Osaka on June 29, 2019.
Brendan Smialowski | AFP | Getty Images.

The growing divide between China and the U.S. is expected to accelerate, disrupting long-running economic ties and forcing investors to reassess their view of global markets.
Tensions escalated this week after the U.S. claimed two Chinese hackers were targeting American companies working on virus research and were stealing information from companies around the world, both for profit and on behalf of the Chinese government. Then, the U.S. ordered the shutdown of China’s Houston consulate, claiming it was a necessary step to protect intellectual property and the data of private citizens.
Wall Street firms have been examining the implications of the reversal of a decades-long effort to form a more symbiotic relationship between the world’s two largest economies. One consistent view is the world will be far more polarized, with economies and companies gravitating toward either a Chinese or an American orbit.
But the realignment could be even more complicated.
“Given, the Covid-19 crisis, how China handled the early stages of it and now the imposition of the national security law on Hong Kong, it’s really difficult to see how the U.S. and the West and China can get back to normal,” said Jimmy Chang, chief investment strategist at Rockefeller Asset Management. “The decoupling will only gain momentum in the coming year, unless there are major policy shifts within China. At this point, it doesn’t look likely.”
The latest friction nevertheless had little market impact as major averages opened slightly higher Wednesday. Beijing vowed to retaliate unless the U.S. rescinded the order to close the consulate.
Chang argues that investors should be paying even more attention to the unraveling relationship between Washington and Beijing. He said they instead are focusing on how world markets are benefiting from massive fiscal and monetary stimulus. The resulting relocation of supply chains and shifting trade patterns could have significant impact on some companies and economies.
Longtime market bull Ed Yardeni warns that in addition to the coronavirus, the deteriorating relationship is one reason why he sees the potential for a market pullback of more than 20%.

Wall Street assessing decoupling

In its second-half outlook, BlackRock said the pandemic is fueling dynamics between the U.S. and China that were already underway.
The “rivalry looks set to affect nearly every dimension of the U.S.-China relationship — regardless of the U.S. election outcome,” the firm said. “Other countries will increasingly be pushed to choose sides. Decoupling is focused on — but not limited to — the technology sector. This means investors need exposure to both markets, especially as the center of gravity of global growth is moving to Asia.”
The markets for the most part have looked past the tension, but there could be periods of unease that could create headwinds.
“I think you only need to roll back the clock 12 months to a moment when these kinds of pronounced frictions between the U.S. and China, particularly around escalating trade disputes, had a real impact on risk-on risk-off sentiment,” said Mike Pyle, BlackRock’s global chief investment strategist.
Pyle said there were recent signs of that when Secretary of State Mike Pompeo took action to decertify Hong Kong’s status as separate from China and deny visas to some Chinese nationals. Asian equities responded to that as well as to the U.K.’s recent announcement that it would ban Huawei from its 5G network. The U.K. followed the lead of the U.S., which has cracked down on the Chinese telecom giant and restricted access to U.S. suppliers because of allegations of cyber espionage.
For investors, the implications are significant and should be considered when structuring portfolios.
“I think there are any number of trades to be thinking about. One of the important themes is building a more balanced set of exposures to the two big engines of global growth,” Pyle said. “The U.S. and North America more broadly, and East Asia, rooted in China. … It would be exposure into China assets themselves or indirectly through Taiwan, through Korea, through Australia, through Japan.”
Pyle said that previously, investments had been designed to benefit from  globalization, but that trade is now splintering.
“The economies are going to be less correlated and financial markets are going to be less correlated,” he said. He pointed, for instance, to the higher yields on Chinese sovereign debt, which were rising, as U.S. rates moved lower in recent weeks. 

Politics could raise tensions

Analysts expect to hear more anti-China rhetoric as the November presidential election gets closer. The Trump administration’s actions against China are also likely to mount.
“On one hand, they want China to buy agricultural goods, but on the other hand, it’s very effective making China the target,” Chang said. “You will see both parties coming up with anti-China positions as a way to win votes. I do think there’s a bipartisan consensus to get tougher on China. I do anticipate after the election things will move at a faster pace.”
Chang said that from the Chinese perspective, being tough on the West could play well at home. Neither side is likely to reverse course. At a symposium Tuesday, China President Xi Jinping vowed to continue strengthening China’s domestic market while further opening to foreign investors. Xi was quoted as saying China was “on the right side of history” in its continued commitment to globalization, and he encouraged Chinese companies to expand operations overseas.
“The mutual trust has been lost. For decades, the West kept saying if you do more trade with China, you have openings with them and they become more like us, but the opposite has happened in the last few years,” Chang said.
There could ultimately be fallout for U.S. companies, but Chang notes for now they have not been targeted by China. Analysts say Apple could be vulnerable, both because of its China revenues and supply chain exposure.
“So far, China has been playing nice with American companies because the Chinese government tends to look at American businesses as their lobbyists in Washington,” said Chang, noting Beijing is using its Belt and Road infrastructure development strategy to gain influence with other countries.
 U.S. Attorney General William Barr last week slammed U.S. technology companies for being “pawns of Chinese influence.” He said tech companies and Hollywood were “all too willing to collaborate with the Chinese Communist Party.” Both Apple and Cisco denied specific claims made by Barr.
This week, the U.S. barred 11 more Chinese companies from buying American technology and other products without a special license. The U.S. said the sanctioned companies were involved in human rights violations related to China’s targeting of Muslim Uighurs in Xinjiang.
The 11 companies are current or former suppliers to major international brands, including Apple, Alphabet, HP, Hugo Boss and Ralph Lauren, according to a New York Times report.
The fraying of the U.S.-Chinese relationship also intensifies the divide on national security issues The U.S. objects to China’s claim of dominance in the South China Sea, and Asian countries who benefit from trade with China also look to the U.S. as a counterbalancing force.
“We really are at the beginning of this stage, and it has deep implications,” Chang said. “The rise in global trade and China becoming the world’s factory is a multidecade trend. You’re talking about almost a 20-year trend going into reversal. What it means to supply chains, pricing and inflation down the road is also a very gradual transition. Moving away from China in the supply chain will take years to realize.”
Pyle said multinationals are already working to redirect their supply chains from China and that should increase.
“This results in higher costs of goods sold. The question is does it manifest itself in compressed profit margins or higher end prices, i.e. greater inflation risk,” he said. “The variable that will distinguish is what firms will have super-star status,” meaning they have the ability to pass price increases to customers.
“When the two biggest economies start to decouple, there’s going to be some impact. So many multinationals benefited for so many years from shifting manufacturing to China, lowering their costs, enhancing their margins,” Chang said. “When you reverse that process, how much damage will be incurred?”
For U.S. companies selling goods in China, he said the government could make it more difficult in terms of tariffs or by creating a backlash against foreign products to favor domestic companies. A transition phase as companies shift their production is likely to have a mixed impact on companies.
Energy expert Daniel Yergin, vice chairman of IHS Markit, said the realignment will also have a mixed impact on countries that may find themselves caught in the middle. He has spent a lot of time examining what he calls the move toward a new cold war. He and others say there could be a multipolarizing of interests as Europe pursues its own trade strategies.
“A lot has to do with how important China is to your country. Germany is going to look at it differently than England,” he said. “China is very important to its economy. This is going to be complex, and we’re going to discover the world is a lot more interconnected than people realize.”

Investing for the new world order

Morgan Stanley, in a recent note, studied the potential impact on 35 industry sectors of the decoupling of the two economies.
Eleven sectors will most feel the brunt of increased costs and other challenges to business operations. They include global auto and component makers; global transportation and aerospace; global capital goods, U.S. IT hardware and internet, and U.S. and Asian semiconductors.
Thirteen sectors should benefit from continued globalization, including global chemicals, beverages and luxury goods. Global pharmaceuticals, biotechnology and medical technology also benefit. U.S. banks and insurance companies were on that list.
“That is, the benefits from continued globalization — new markets and more diverse supply chains — outweigh the challenges,”  the Morgan Stanley analysts said.
As for American capital markets, the U.S. wants to crack down on Chinese companies’ listings. Companies would be required to show they had no foreign government ownership and submit to audits.
At the same time, one of the year’s biggest IPOs, fintech firm Ant Group, an affiliate of Chinese e-commerce giant Alibaba, has planned its dual listing completely in China, on Shanghai and Hong Kong exchanges.
The Peterson Institute for International Economics recently published a paper that argued it would be pointless to delist Chinese companies. It noted that the integration in the financial sector looks likely to increase despite President Donald Trump’s warning that “a complete decoupling from China” remained a policy option.
U.S. financial institutions are increasing their presence in China, where authorities have been loosening rules on foreign ownership. The Peterson Institute listed examples of American companies expanding their role, including Goldman Sachs which was approved in March to raise its stake in joint venture Goldman Sachs Gao Hua Securities to 51%. Morgan Stanley was also given approval to raise its stake in its joint venture securities firm, Morgan Stanley Huaxin Securities, from 49% to 51%.
In their report on decoupling, the Morgan Stanley analysts said there should also be some regional winners, which would include Asian internet and European enterprise software, which benefits from regulatory protection in a “multipolar world.” There are also sectors that will not be much impacted at all, such as global energy and global metals and mining.
“From the standpoint of global trade, I think global trade will be negatively impacted. In terms of weaker or stronger, you can argue there’s always that transition that will hurt some companies but help others,” Chang said. The same could be true of countries “Could India become a beneficiary as many Western companies move their supply chains? Or Indonesia?” 

News | Business | Economy | South Korea: South Korea in recession as exports at 57-year low

3minutes - Source: BBC

A woman holding an umbrella crosses a road in central Seoul, South Korea. Image copyright Getty Images
South Korea has fallen into recession as the country reels from the impact of the coronavirus pandemic.
Asia's fourth-largest economy saw gross domestic product (GDP) fall by a worse-than-expected 2.9% in year-on-year terms, the steepest decline since 1998.
Exports, which account for nearly 40% of the economy, were the biggest drag as they fell by the most since 1963.
In recent weeks official figures have confirmed that both Japan and Singapore have also gone into recession.
But South Korea's finance minister Hong Nam-ki remains optimistic that the economy will recover swiftly.
"It's possible for us to see China-style rebound in the third quarter as the pandemic slows and activity in overseas production, schools and hospitals resume," Mr Hong said.
The South Korean government has so far implemented about 277 trillion won (£181bn; $231bn) worth of stimulus measures to tackle the effects of the pandemic on its economy.
However, authorities in the trade-reliant nation have very little control over exports, ranging from computer memory chips to cars.
In another indication of how Covid-19 has hit the region's exporters, Australia has reported its biggest budget deficit since the Second Word War.
The country has swung to a deficit of A$85.8bn (£48.1bn; $61.3bn) for the year ended in June 2020.
Treasurer Josh Frydenberg also said the shortfall is predicted to grow to A$184.5bn this financial year as the pandemic pushes Australia into its first recession in three decades.
In May, Japan fell into recession for the first time since 2015 as the world's third biggest economy shrank at an annual pace of 3.4% in the first three months of 2020.
Last week official data showed that Singapore had fallen into recession as second quarter GDP shrank 12.6% on a year-on-year basis.
Authorities forecast it will be Singapore's worst recession since its independence from Malaysia in 1965.
But last week, China said it had avoided falling into recession as its economy grew by 3.2% in the second quarter of the year after a record slump in the previous three months.
The bounce-back followed the biggest contraction in the world's second-largest economy since quarterly GDP records began.

News | Business | China Star Market: Market: China's Star market aims to take on the Nasdaq

 Justin Harper 

The launch of the SSE STAR Market in the hall of Shanghai Securities Exchange in Shanghai, China Monday, 22 July, 2019. Image copyright Getty Images
Image caption China's Star market launched a year ago this week in Shanghai
The Star market, China's answer to the Nasdaq, celebrates its first anniversary this week.
The tech-heavy stock market was set up at the request of President Xi Jinping as relations with the US began to sour.
Officially called the Shanghai Stock Exchange Science and Technology Innovation Board, it now includes more than 120 firms.
It's already Asia’s most valuable stock market, valued at more than $400bn (£314bn).
This month it hit a record level in terms of new listings as it raised more than $7bn, a 46% increase on July 2019 according to figures from data firm Refinitiv.
This was boosted by last week's listing of semiconductor manufacturer SMIC, China's biggest share sale in a decade.
Experts believe the Star market is in a strong position to attract listings from both Hong Kong, given the political tensions there, and the US which is clamping down on the listing of Chinese firms.
But can it rival the Nasdaq 100 which is more than 20 times bigger?
The Nasdaq (National Association of Securities Dealers Automated Quotations) stock market includes its biggest tech firms within an index called the Nasdaq 100.
This index features some of the world’s most valuable technology companies including Apple, Microsoft and Amazon. It was worth almost $10tn at the end of 2019.
To mark its first year anniversary, the Star market announced on Thursday that it was also splitting off its biggest listings, to be included in the Star Market 50 Index.
"The move to fully open the Chinese capital markets is obviously a long term reality - so the success of a mainland-type Nasdaq is always going to happen in the future," said Andy Maynard, managing director at China Renaissance investment bank.
"The reality of the size and complexity of China's new economy play will always make China attractive globally - just as Nasdaq has done since the '' days."
"The conditions are very attractive and would definitely make the Star Market a worthy rival of the Nasdaq," added Jacob Doo, chief investment officer at Envysion Wealth Management.
A major factor is that the Star market’s listing requirements "are less stringent as compared to the Nasdaq, which has imposed restrictions on IPOs for Chinese companies", Mr Doo said.
Ant Group – Alibaba's financial arm – plans to list on the Star market this year and could attract more tech companies to follow suit.
Chinese carmaker Geely, which makes London black cabs, also has plans to list on the Star market.
However, experts say the Star market needs to be more accessible to foreign investors to continue to attract more listings.